Dow gained 47, advancers over decliners 2-1 & NAZ rose 80. The MLP index remained strong, up 7 to the 223s, & the REIT index slid back 1 to the 366s. Junk bond funds edged higher & Treasuries saw more selling in the PM. Oil added 1+ to the 71s & gold inched up 1 to 2021 (more on both below).
AMJ (Alerian MLP Index tracking fund)
![Live 24 hours gold chart [Kitco Inc.]](https://www.kitco.com/images/live/gold.gif?0.2180338269244485)
Total consumer debt hit a fresh new high in Q1-2023, pushing past $17T even amid a sharp pullback in home borrowing. The total for borrowing across all categories hit $17.05T, an increase of nearly $150B (0.9%) during the Jan-to-Mar period, the New York Federal Reserve reported. That took total indebtedness up about $2.9T from the pre-Covid period ended in 2019. That increase came even though new mortgage originations, including refinancings, totaled just $323.5B, the lowest level since the Q2-2014. The total was 35% lower than in Q1-2022 and 62% below the same period a year ago. New home loans peaked at $1.22T in the Q2-2021 & have been falling since as interest rates have increased. A series of Fed rate cuts helped push 30-year mortgage rates to a low around 2.65% in Jan 2021. But rates are now around 6.4%, as the central bank has enacted 10 rate increases totaling 5 percentage points to fight inflation, according to central bank data thru Fannie Mae. The higher rates helped push total mortgage debt to $12.04T, up 0.1 percentage point from Q4. Borrowers had used the previously lower rates both to buy new homes & to refinance, the latter seeing a boom that appears to have ended. “The mortgage refinancing boom is over, but its impact will be seen for decades to come,” Andrew Haughwout, director of household & public policy research at the New York Fed, said. Fed data shows that about 14M mortgages were refinanced during the pandemic period starting in Mar 2020. Some 64% were considered “rate refinances,” or homeowners looking to take advantage of lower borrowing costs. Average savings totaled about $220 per month for those borrowers. “As a result of significant equity drawdowns, mortgage borrowers reduced their annual payments by tens of billions of dollars, providing additional funding for spending or paydowns in other debt categories,” Haughwout added.
Consumer debt passes $17 trillion for the first time despite slide in mortgage demand
Lael Brainard, director of the White House National Economic Council said that while she expects Congress will avert default, American business leaders have "concerns" that lawmakers may fail. Brainard, who recently began serving as the council’s director after previously serving as vice chair of the Federal Reserve made the remarks yesterday. "When
I talk to CEOs, to business leaders around the country, they tell me
that things are actually going very well," Brainard said. "But their
biggest concern is that Congress might fail to prevent default and that
would be catastrophic. It would lead to higher borrowing costs for cars,
for mortgages, for small businesses, even for the U.S. government." Even
with these concerns about a potential US default, Brainard said the
debt-ceiling talks among lawmakers in DC are "serious" &
"constructive." "We do pay our bills," the economist added. "Congress has always
acted, and they know how to do it, and they have the capacity to do it
in a timely manner." The debt ceiling,
which is currently around $31.4T, is the legal limit on the
total amount of debt that the federal gov can borrow on behalf of
the public, including for Social Security & Medicare benefits,
military salaries, & tax refunds. The gov bumped up against that limit in Jan,
prompting the Treasury Dept to initiate a series of actions that
are known as "extraordinary" measures & are intended to stave off a
default. The US could default on its federal debt as soon as Jun 1 if an agreement is not reached. Despite concerns over the debt ceiling, Brainard said the current ongoing conversations are budgetary in nature.
Business leaders ‘concerned’ Congress won’t prevent default: WH National Economic Council chair
China is leaving behind pandemic lockdowns US companies say the country's recovery is boosting their overall sales as consumers in their home markets watch their wallets. With its large population & swelling middle class, China is a desirable market for many multinational companies that have seen their US businesses mature. But its zero-Covid policy, which imposed harsh restrictions to stop the spread of the virus, hurt the country's economy & revenue for the many US companies that sell their goods or services there. After rolling back the policy in Dec, China's economy grew 4.5% in Q1. US companies are reporting that demand in China is returning, boosting their sales at a time when many US consumers are pulling back their spending. However, the recovery hasn’t been as swift or dramatic as many investors hoped. Most companies are still waiting to surpass pre-pandemic sales in China. The travel retail segment is taking even longer to bounce back. Morgan Stanley analyst Kelly Kim wrote in a research note that the firm's China consumer team expects that recovery will come in 3 stages: a spring break in Feb thru Apr, summer “revenge spending” in May thru Jul, & a stable recovery starting in Aug. US-based restaurants were among the companies that saw demand return in China. But sales haven't snapped back to 2019 levels just yet. Chinese consumers also appear to be traveling again as restrictions lift, visiting theme parks and casinos. The increase in travel & leisure spending helped a range of US companies at the start of the year.
China’s recovery lifts U.S. companies as domestic consumers pull back spending
Gold futures settled a bit higher after ending with a loss last week. Gold might be ready to make another run to record high territory as investors should be prepared for debt limit talks to hit several major roadblocks. Gold for Jun settled at $2022 an ounce, up $2 for the session.
Gold futures finish higher after last week’s loss
US & global benchmark crude-oil prices posted a gain for the first time in 4 trading sessions. The US debt-ceiling negotiations stand out as a significant risk for global crude prices, both due to the potential for broader economic consequences as well as the importance of the $'s value on crude pricing. Still, optimism over a debt-ceiling deal, as well as the potential repurchase of oil for the US Strategic Petroleum Reserve provided support for oil. Jun West Texas Intermediate crude rose $1.07, or (1.5%) to settle at $71.11 a barrel.
Oil futures end higher for the first time in 4 sessions
The stock market continued to be hold, waiting for information on the debt ceiling negotiations. It continues to be a very unsettled situation.
Dow Jones Industrials
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